What's On Tap...

Lethargy: A lack of energy and enthusiasm


In last week’s edition of “What’s On Tap,” my colleague Chris Deeley, posted a fascinating chart showing the percentage of Americans owning stock at a multi-decade low. But after reading the McKinsey report last week on the dismal future of equity returns and the constant chorus of “Sell in May,” is it any wonder that investors lack confidence and our markets continue to trade with lethargy?

The McKinsey report makes the case that the past thirty years have been “exceptional” and the next twenty may not be so wonderful. First, the report appears flawed as it makes several assumptions about growth that seem plausible while many are likely to be wrong. Second, as we have witnessed over the past seven years including a recession second only to the Great Depression followed by what is currently the second longest bull market in history, the future will probably not resemble the past.

Let’s take a look at our current markets and see what is working. First, below the surface breadth has been extremely strong as evidenced by the NYSE advance/decline line reaching a new all-time high on April 29th.

Next, several months ago there was much discussion of the impending crisis in the high yield market. As we have seen, the wider spreads existed mostly due to lower energy prices as the spreads in non-energy high yield remained low.  In their most recent guide to the markets, JPM points out that although high yield spreads are somewhat elevated relative to their historic average, the default rate is at 3.2%, lower than the 3.9% historical average. The Braver Tactical High Income strategy has capitalized on this trend as it has gained over 6% YTD as of April 29th.

This Friday the government will release employment data for April that will be closely monitored by those looking to analyze the Federal Reserve’s next move. One important statistic to look at will be the employee payroll tax receipts. Although ignored by most in the business media, this statistic is a good indicator of economic well-being. The April number should show the growth of employee tax receipts moving into an expansionary phase from contraction beginning last October.

The Bank of Japan’s recent decision to refrain from more stimulus, coupled with better employment data, provides the Federal Reserve with the opportunity to raise rates in June. Contrary to the belief of “Don’t Fight the Fed,” the S&P 500 Index usually rises in the first year following the Federal Reserve’s first rate hike. Stronger growth and a solid labor market is a favorable backdrop for equity markets.

At Braver Capital, we continue to take advantage of these lethargic markets. As mentioned earlier, Tactical High Income and Tactical Opportunity have been able to perform well during the first four months of the year. In addition, our Global Tactical Balanced strategy is finding opportunity in the global equity and bond markets as the currency fluctuations persist.


Finally, this Sunday is Mother’s Day and we encourage you to plan ahead and make sure you take care of Mom. As I conclude, I want to share some wisdom that my recently deceased mom gave me and how it relates to being a good advisor:

1. Work harder than the next person;

2. Being 15 minutes early is on-time;

3. It is nice to be important, but more important to be nice.


Best regards,








                                                                      Stephen E. Johnson, JD, CFP®, CPWA®
                                                                    Portfolio Manager, Fundamental Analyst









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